Freddie Mac Posts Strong Q1 Earnings Report – NMP Skip to main content

Freddie Mac Posts Strong Q1 Earnings Report

May 04, 2023
Freddie Mac announced that its Credit Risk Transfer (CRT) program transferred approximately $2.5 billion of credit risk on $69 billion of single-family mortgages from taxpayers to the private sector during the third quarter of this year

Net income rose 13.2% from Q4, but was down 47% from a year earlier.

The Federal Home Loan Mortgage Corp., or Freddie Mac, had a strong first quarter of 2023, reporting that its net income increased 13% from the fourth quarter even as its net revenue slipped.

According to a report released Thursday, the government-sponsored enterprise reported net income of just under $2 billion, up $232 million or 13.2% from $1.76 billion in the fourth quarter of last year. The result, however, was 47% from net income of $3.7 billion a year earlier.

The organization said the year-over-year decline was primarily driven by lower net revenues and a credit reserve build in the current period compared to a credit reserve release a year earlier.

Net revenue was $4.83 billion, roughly the same as the prior quarter but down 17% year-over-year, as higher net interest income was offset by a decline in non-interest income. 

Net interest income was $4.5 billion, up 10% year-over-year, primarily driven by mortgage portfolio growth, higher average portfolio guarantee fee rates, and higher investments net interest income due to higher interest rates, Freddie Mac said.

The increases were partially offset by a decline in deferred fee income due to slower prepayments as a result of higher mortgage interest rates, it said. Non-interest income was $0.3 billion, down 81% year over year, primarily driven by a decline in net investment gains in its single-family segment from elevated levels a year earlier.

The provision for credit losses was $0.4 billion for the first quarter of 2023, driven by a modest increase in its credit reserve primarily attributable to new acquisitions in single-family. The benefit for credit losses of $0.8 billion for the first quarter of 2022 was primarily driven by a credit reserve release due to higher estimated house prices and an improvement in forecasted economic conditions.

Michael J. DeVito
Michael J. DeVito

Non-interest expense remained unchanged at $1.9 billion.

Freddie Mac’s net worth grew to $39.07 billion, up 5.5% from $37.02 billion the fourth quarter, and up 23.2% from a year earlier. It’s total mortgage portfolio, meanwhile, stood at $3.4 trillion.

“Freddie Mac’s solid performance in the first quarter helped promote sustainable homeownership and rental opportunities across the nation,” said Michael J. DeVito, Freddie Mac’s CEO. “In an uncertain economic environment, we remain focused on our mission and will continue to serve as a stabilizing force for the housing finance system.”

The enterprise reported financing 190,000 mortgages during the quarter, with 54% of eligible loans being affordable to low- to moderate-income families. It also enabled 72,000 first-time home buyers to purchase a home. 

Freddie Mac said it also financed 60,000 rental units, with 89% of eligible units being affordable to low- and moderate-income families.

Single-Family Highlights

  • New business activity of $59 billion, down 72% year-over-year, as both home purchase activity and refinance activity slowed due to higher mortgage interest rates.
  • Mortgage portfolio of $3 trillion, up 4% year-over-year and flat quarter-over-quarter, as portfolio growth has moderated in recent periods due to the slowdown in new business activity.
  • Serious delinquency rate of 0.62%, down from 0.92% a year earlier, primarily driven by the decline of loans in forbearance
  • Completed approximately 24,000 loan workouts
  • 62% of mortgage portfolio covered by credit enhancements

Multifamily Highlights

  • New business activity of $6 billion, down 60% year-over-year, as higher mortgage interest rates and greater market uncertainty have reduced demand for multifamily mortgage financing.
  • Mortgage portfolio of $426 billion, up 3% year-over-year and down 1% quarter-over-quarter, primarily due to the slowdown in new business activity.
  • Delinquency rate of 0.13%, up from 0.08% a year earlier.
  • 93% of mortgage portfolio covered by credit enhancements.
About the author
David Krechevsky was an editor at NMP.
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